01—Abstract
Summary
Summary of the 10-Q filed November 7, 2024. Cited figures are marked; the original filing is the authoritative source.
Packaging Corporation of America reported third-quarter 2024 net sales of $2.18 billiona, up from $1.94 billion a year earlier, and net income of $238.1 million, or $2.64 per diluted share, compared with $183.2 million, or $2.03 per diluted share, in the third quarter of 2023.
The increase was driven primarily by higher Packaging volume and prices/mix, lower freight and logistics expenses, and lower scheduled outage expenses, partly offset by higher operating and converting costs and higher depreciation. Management expects fourth-quarter earnings to be lower than third-quarter earnings, citing two fewer shipping days, seasonally higher energy and chemical costs, higher scheduled mill maintenance outage costs, and a slightly higher depreciation expense. For the first nine months of 2024, net sales were $6.24 billionb and net income was $584.0 million, or $6.48 per diluted share, versus $6.38 per diluted share a year earlier.
Cash provided by operating activities was $865.8 millionc, down from $979.8 million, while capital additions rose to $468.4 million from $328.6 million, and the company expects 2024 capital investments of $670 million to $690 million. The company repaid $400 million of 3.65% senior notes due September 2024 using proceeds from a 5.70% note offering and cash on hand, and ended the period with $676.6 million of cash and cash equivalents and $2.49 billion of fixed-rate senior notes outstanding.
A key item for investors is the DeRidder litigation: a jury awarded plaintiffs about $91.8 milliond in compensatory damages in April 2024, and the company recorded a $127.7 million accrual, including $35.9 million of interest, offset by an equal insurance recovery receivable. The company intends to appeal and believes its insurance covers the verdict and interest.
02—Key points
Key Highlights
- Third-quarter 2024 net sales rose to $2,182.4 million from $1,936.0 million, and net income rose to $238.1 million from $183.2 million.
- Diluted EPS was $2.64 for the third quarter of 2024 versus $2.03 a year earlier; nine-month diluted EPS was $6.48 versus $6.38.
- Packaging segment operating income was $320.7 million in the third quarter of 2024, up from $256.8 million, with a record containerboard production of 1.3 million tons.
- Management expects fourth-quarter 2024 earnings to be lower than third-quarter earnings.
- Operating cash flow for the nine months fell to $865.8 million from $979.8 million, while capital expenditures rose to $468.4 million from $328.6 million.
- DeRidder litigation: a $127.7 million accrual (including $35.9 million of interest) is offset by a $127.7 million insurance recovery receivable; the company intends to appeal.
- The company repaid $400 million of 3.65% senior notes in September 2024 and repurchased no shares during the first nine months of 2024; $436.0 million remained available under the buyback authorization.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, Packaging Corp. of America kept $0.11.
- Revenue$2.18B100.0%
- Cost of revenue−$1.68B76.9%
- Gross profit$505.2M23.1%
- Operating costs−$178.1M8.2%
- Operating income$327.1M15.0%
- Interest, other & tax−$89.0M4.1%
- Net income$238.1M10.9%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed November 7, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $2.18B$1.94B | +12.7% |
| Cost of Revenue | $1.68B$1.52B | +10.1% |
| Gross Profit | $505.20M$412.70M | +22.4% |
| SG&A Expenses | $162.00M$144.20M | +12.3% |
| Operating Income | $327.10M$258.60M | +26.5% |
| Net Income | $238.10M$183.20M | +30.0% |
| EPS (Basic) | $2.65$2.04 | +29.9% |
| EPS (Diluted) | $2.64$2.03 | +30.0% |
| Shares Outstanding (Basic) | 89.10M89.10M | 0.0% |
| Shares Outstanding (Diluted) | 89.50M89.50M | 0.0% |
05—Questions
Frequently Asked Questions
How did Packaging Corporation of America perform in the third quarter of 2024?
Net sales were $2,182.4 million, up from $1,936.0 million, and net income was $238.1 million, or $2.64 per diluted share, compared with $183.2 million, or $2.03 per diluted share, in the third quarter of 2023. Growth was driven mainly by higher Packaging volume and prices and mix, lower freight and logistics expenses, and lower scheduled outage expenses.
What is the company's outlook for the fourth quarter of 2024?
The company expects fourth-quarter earnings to be lower than third-quarter earnings. It cites two fewer shipping days, lower Paper shipments, higher seasonal energy and chemical costs, higher scheduled mill maintenance outage costs, and slightly higher depreciation expense.
What is the DeRidder litigation and what is its financial effect?
A jury in April 2024 awarded plaintiffs in the remaining DeRidder mill lawsuit approximately $91.8 million in compensatory damages, subject to interest. The company recorded an accrual of $127.7 million, including $35.9 million of interest, and a matching $127.7 million insurance recovery receivable. The company intends to appeal and believes its insurance covers the verdict and interest.
How is the company's liquidity and debt position?
At September 30, 2024, the company had $676.6 million of cash and cash equivalents, $95.0 million of short-term and $69.7 million of long-term marketable debt securities, and $323 million of unused revolving credit capacity net of letters of credit. Total senior notes outstanding were $2,492.1 million, all at fixed rates, after the September 2024 repayment of $400 million of 3.65% notes.
How much did the company spend on capital investments and what is planned for 2024?
The company spent $468 million on internal capital investments in the first nine months of 2024, compared with $329 million a year earlier. It expects 2024 capital investments of $670 million to $690 million and estimates about $15 million of 2024 capital expenditures for environmental compliance.
06—Continue